Optimal stopping problems for running minima with positive discounting rates

We present analytic solutions to some optimal stopping problems for the running minimum of a geometric Brownian motion with exponential positive discounting rates. The proof is based on the reduction of the original problems to the associated free-boundary problems and the solution of the latter problems by means of the smooth-fit and normal-reflection conditions. We show that the optimal stopping boundaries are determined as the minimal solutions of certain first-order nonlinear ordinary differential equations. The obtained results are related to the valuation of perpetual dual American lookback options with fixed and floating strikes in the Black-Merton-Scholes model from the point of view of short sellers.